For the next 2 years, a lease is estimated to have an operating net cash inflow of $7,500 per annum, before adjusting for $5,000 per annum tax basis lease amortization, and a 40% tax rate. The present value of an ordinary annuity of $1 per year at 10% for 2 years is $1.74. What is the lease's after-tax present value using a 10% discount factor?
Choice 'c' is correct. Return on investment equals net income divided by average invested capital:
Choices 'a', 'b', and 'd' are incorrect, per the above calculation.
Freeman
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